Winning online in age of digital deception

February 11, 2014

Counterfeiting and brand theft are crimes that have been given unlimited new life and opportunity online — they affect all industries and all major brands on a global scale. Recently the watchdog agency Business Action to Stop Counterfeiting and Piracy (BASCAP) put a $1 trillion annual figure on global losses from counterfeiting and piracy, with 2.5 million jobs put at risk.

Luxury apparel, accessories fakes and counterfeit pharmaceuticals are widely recognized as targets, but every brand in electronics and categories from food and drink to heavy industry are also at risk. Our recent research shows that more than three-quarters of online consumers think they are buying the genuine article — only 24% of buyers intentionally purchase fake brand items, while 76% (and climbing) intend to purchase the real brand and are being duped.

Some online scams are so efficient and convincing that the online “retailer” doesn’t even ship any product out — and once payment is received, the scammers disappear. Making and selling “hard copy” fakes is also on the rise worldwide, and perpetrators are gaining more traction with techniques like 3-D printing to manufacture goods and parts.

The problem is vastly compounded by online marketplaces. Setting aside for a moment rogue sites, much as legitimate marketplaces have stringent policies for policing vendors, sellers of counterfeit goods still slip through the net. Mobile apps and social media are new frontiers. Social media networks are used to promulgate links to counterfeit products on both online marketplaces and rogue websites. Copycat social media pages can use your company name and logo to lend greater credibility to fraudulent activity — and some of them even accept payments for “orders.”

Given that legitimate Internet brand retailing is all about maximizing traffic to one’s own site, increasing conversion rates of site visits, maximizing online marketing investments and driving repeat online purchases, the issues highlighted above have a strong negative impact on these metrics. The loss of trust and credibility in the retailer or brand alone has huge ramifications. Therefore, not only do fake websites need to be taken down, but online marketplaces that support counterfeiting and fraudulent Facebook pages need to be eliminated too.

What should online retailers be looking for?
Finding the fakes, knowing how to identify them and blowing their cover is a delicate and painstaking matter, but ultimately, individual sites or listings on marketplaces selling counterfeit products can be taken down. As with all markets, there is a supply side and a demand side of counterfeiting. We’re all familiar with the consumer demand side: the desire for a certain luxury brand item to call our very own, or the temptation to buy a pirated DVD of a hot movie before its general release. In parallel, the supply side of this equation reaches way back into manufacturing and retail distribution.

Let’s take a look at online prescription and over-the-counter medications, for example. The power of consumer trust in established brands is almost palpable — and consumers are willing to pay significantly more for these proprietary and branded products. Yet there is a world of counterfeiters seeking to profit by exploiting that trust, and they’re willing to go to great lengths to dupe the consumer through phishing and highly plausible packaging.

While pursuing cybercriminals — online trademark infringement, fake websites, brand adulteration, fraudulent selling and the like — may seem like a very slippery business, there are several clear-cut ways to identify and catch online fakes and track down retail fraudsters. It takes constant vigilance to identify fraudulent websites and online brand infringement. Let’s start with comparing product photos. While this may not be a decisive way to determine whether a product is fraudulent or not on its own, it is certainly helpful in identifying illegitimate sites using standard “official” shots. In turn, these images may be copyrighted, and posting these images alone would allow an actionable response. At the same time, we are cross-referencing other actionable intelligence items such as text matching on Web pages, coupled with the use of a brand logo such as Pfizer’s, a product shot of a Viagra pill, for example, or an FDA logo. Sites that match a number of these infringements are prime candidates for further investigation.

Probably out ahead of sectors like designer apparel, on the distribution side, the pharmaceutical industry has taken to coding medication lots as its first line of defense, with authenticated product labels and other cryptography-based methods in use, and more emerging all the time. The result of this coding is that retailers are able to check the origin of the medications — a system that works well until the warehouse stage of the supply chain.

At that point, packaging becomes key to a product’s authenticity, and numerous markers are put in place to seal a product’s identity and value. Knowing that a preponderance of missteps occurs between the warehouse and the retailer, we’ve gone to such lengths as studying how printing is done on the foil packaging of medications, in addition to the box and on the pills themselves. Colors that are used in packaging as well as on the pills can also be a tipoff to counterfeit products. This would be analogous to checking not only fastenings and notions, but also inside labels and printed packing tissue on designer clothing and accessories.

Every retailer has a responsibility to acknowledge that the problem of online counterfeiting is real, immediate and in proximity — cyber criminals trafficking in counterfeit products are ubiquitous and constantly adapting. Taking action provides a sure and very rapid return on investment, because removing such infringements directly and positively affects the core metrics of Internet retailing — more traffic, more conversion, more satisfied and happy customers. We don’t say this lightly: many companies are completely unaware of breaches of their copyrights, brands and other critical online assets. Get vigilant, and stay vigilant. It’s time to wake up and smell the chicory.

Francesco Nazzarri is group director of product and marketing and Haydn Simpson is product director of brand protection at NetNames, a firm specializing in global online security, brand protection and anti-piracy services . They can be reached respectively at Francesco.Nazzarri@NetNames.com and Haydn.Simpson@NetNames.com.

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